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3/30/13

Earlier today Acting President and presidential candidate for the real job in Venezuela (the one left vacant by the demise of a certain Chávez fellow, you might have heard), Nicolás Maduro upped (lowered?) the tone of the campaign by using the H word about his rival. Yup, he trod where those wishing to cause a spat tread, calling Henrique Capriles and his band of opposition players"the heirs of Hitler".

On hearing that, ex-Prez of neighbouring Colombia, Alvaro Uribe, (no stranger to the right wing of the political world himself) couldn't keep his tongue tied down and tweeted to his 1.87m followers:

What do you need to get a job as a receptionist in the swanky San Isidro area of Peru's capital city Lima?Your humble scribe dutifully translates:

Yep that's right, please only apply for this job if you have white skin.

We shit thee not, ladies and gentlemen. It actually says that.

This advert for receptionist in Tecsup Telesup (several mailers have pointed out this spelling mistake, thanks people), a large, privately run university in Lima appeared in newspapers in the capital last weekend and has caused a bit of a stir, not least because it's racist garbage of course, but also because the entity is owned by a congressman for the right wing Solidaridad Nacional party.

So yeah, we're now at questions being asked at ministerial level on this and the university now faces a fine for being a bunch of racist shits (quite right too), but the saddest thing about this is that Tecsup Telesup is only really officializing something that's pretty apparent if you spend more than a day going in and out of businesses and offices in the downtown expensive zones in Lima. Businesses there just all coincidentally don't get round to employing them there brown looking people on reception desks.

Of our regular bunch only Fortuna Silver (FVI.to) is making a profit in 2013 year to date, and then barely. MAG Silver (MAG.to) is in second spot but all the same underwater, at roughly the same level as silver bullion (via the ETF, SLV). Then comes the bunch is at give-or-take negative 20% this year...sheesh, what a trainwreck of a sector, seriously.

The market doesn't care when decent gold mining companies publish decent annual results if the price of gold drops $10/oz on the same day. Which is simply more evidence as to the abject stupidity of this market.

UPDATE: Reader RK put it well in a mail just received:

Otto,For now, its all about the gold price, save for meaningless range bound activity in the stocks, unless they have bad news, in which case they are shot.

We follow this dataset quite closely over at the weekly; here's last Sunday's chunk of prose:

"On to the copper macro scene and one article in particular from last week needs featuring here, a most interesting Reuters piece (6) on the state of copper warehouse inventories and how Glencore in particular seems to be playing the system in order to maximize its own profit, via the somewhat out of the way Malaysian port of Johor. It’s yet another report that’s unfair to excerpt as there’s a lot of ground covered, so I strongly recommend that you check out the link and read the whole thing, but just to give some flavour here’s one section:

Copper stocks in Shanghai and LME warehouses are the highest in about 10 years, and bonded stocks in Shanghai near records.

It is also a result of a change in China's export duties which makes it easier for Chinese companies to export mountainous domestic stockpiles back into internationalmarkets.

But where it ends up depends on who is prepared to pay the best price. And it is becoming increasingly apparent the strongest contender of them all is Glencore's warehousing arm, Pacorini.

"China's smelters are just doing what is best for them. They will ship it to whoever gives them the best price. In Asia, that's Pacorini," said a hedge fund source.

It certainly gives another angle on the current inventory build in copper around the world, and also goes some way to explaining why copper prices are holding up well enough at this $3.50-or-so level. On the subject of inventories, we saw another big jump last week to 870,550 metric tonnes (mt) in total warehoused copper (+5.4%), with the LME warehouses up 7.0% to 562,475mt, Shanghai up 3.2% to 239,273mt and the smaller Comex up 0.3% to 68,802mt. However, there was an uptick in cancelled warrants from the recent lows (that have been very low) and that’s a good thing. LME cancelled warrants jumped to 11.55% of inventories and that change is easy to see on the regular chart."

The best way to understand just how bad Serafino's spiel is? Look at what he promises compared to what he delivers. Here's how Gran Colombia Gold (GCM.to) predicted its 2012, back in the outlook section of the 2011 YE MD&A outlook, i.e. the official company predictions for the year.

1) Serafino promised to increase gold production to 155,000 oz in 2012

Result: GCM.to gold production was 100,895 oz

2) Serafino promised to improve gold production at its main Segovia operations to 130k oz

Result: 79,178 oz Au produced

3) Serafino promised to reduce cash costs at GCM, by saying that it would be (and we quote directly) "...continuing to take the actions necessary to reduce the cash production costs on a per ounce basis at the Company’s operated mines in the Segovia Operations."

Result: At the Segovia Operations, cash costs averaged $1,341 per ounce in 2012, up from $1,288 per ounce in 2011

4) Serafino promised to complete and deliver the Marmato pre-feasibility study in 2012

Result: The pre-feas for Marmato is now "expected" (whatever that word means when used by this pathetic company) in June 2013.

5) Serafino promised to re-organize the company in order to simplify the corporate structure and reduce costs

Result: G&A in 2011 was $15.58m. In 2012 it came to $16.497m. That aside from the near $24m hike in annual costs of sales, too.

To sum up, we don't need to subjectively assume Serafino Iacono's bullshit and blather any longer, as he's hoist by his own petard these days. Every single important outlook goal offered by Gran Colombia Gold (GCM.to) last year wasn't just missed, it was missed by a mile. The man that promised higher production and lower costs in 2012 delivered lower production and higher costs. A company that in his mind is Colombia's premier gold miner finished the year with a working cap deficit of $35.8m, almost exactly matching the $35.9m it lost in the period.

You must look at who you are and attempt to know yourself, which is the
most difficult lesson imaginable.

Cervantes,
Don Quijote, 1605

Your
author has received several subscription cancellations in the last three or
four weeks. Happily, with them sometimes come notes like this one from SF:

My
subscription is coming due and I am gong to cancel it. My risk tolerance is too
low for the PM sector so I'm changing to more passive investments.You do have a great letter, and your ethics of
not buying until after you tell your subs is impressive.

Thanks,(name and address withheld)

Ethics*
aside, it’s the type of mail I welcome. Put in terms that apply to others as
well as SF, he’s taken a good look at himself and in the market for juniors,
has decided it’s not for him any longer and has therefore done the right thing
by his standards and along with the move away from the junior mining sector,
he’s not going to renew his (in his case annual) subscription to this
publication. That, people, is a pass grade from the Cervantes and to be crystal
clear, Iapplaud the above decision of
SF without reserve or quarter as well.

When it
comes down to brass tacks it’s all about risk tolerance, which is one of the
most subjective matters of all in any sector of the investment world. Risk
tolerance runs from the highest risk things you can do with your cash (Welcome to Las Vegas, enjoy those comped
suites) all the way down to the guy who sticks his savings in cash under
the mattress because those banks are going to steal his savings one of these
fine days, so screw the 2% interest they’d pay him. There are no right answers
to risk tolerance, but there are a few questions that you should be asking
yourself about your own risk profile for example, whether you feel
uncomfortable about any of your investment risk today. If not, would you
consider adding more risk exposure to your investment portfolio or if so, why
are you still holding uncomfortable risk? One of the things I admire in the
decisions made by people such as SF is the ability not only to recognize an
error (“Hmmm...i don’t like the risk I’ve taken on”) but also have the stomach
to do something about it (“Ok, too much risk, let’s not do this any more, I’ll
sleep better at night”) and thereby improving their life quality. On this
subject, here’s a quote from a post last week at a blog written by and for CFAs
(1):

Let’s be clear on what the data
show: People who are invested outside of the bounds of their risk tolerance are
the ones who freak out when the market pulls back, and they demand that their
adviser sell at the low. Then they wait until it “feels safe again” and jump
back into the markets at the high.

Now
that’s from a client/broker perspective (it’s
a CFA writing for other CFAs about their word, after all) and somewhat
different to the relationship you and I, through this publication, have The
above is considering the nebulous entity known as “the market” in general,
whereas we sail through some of the choppiest waters of the lot in this juniors
world. Junior mining stocks can move up or down 30% without rhyme or reason and
it hardly needs saying that kind of movement isn’t the place where you bet your
mortgage money. But most importantly I don’t manage any of your money, not a
cent of it (I have enough to worry about
with my own, thanks) so at best The
IKN Weekly is a third party service to which you pay good money for assistance
in making your own decisions. However, the baseline issue of risk and its management
is precisely the same and part of your financial exposure to the junior world
is the cash you send to me, to her, to him and to all those other paid-for
information services.

Back to
this “encouraging you to unsubscribe” thing and over the months I’ve been asked
about this attitude by a few of you, regarding the semi-regular theme for nigh on
a year that asks you all to consider, and consider carefully, whether you want
to be involved in a sector as volatile and currently difficult as the juniors
and if not, then advising that you should drop this subscription (as all others you might have to newsletter
services for that matter). The questions that arrive at this desk are along
the lines of, “Is this a reverse-psychology thing?” or “Are you serious about
trying to drive people away from your work?”. Once or twice, “Are you plain
mad?” has been the tone. My answers to those three are “no” “that’s the wrong
question” and “I don’t know, ask my wife” but the Q/A to expand upon is the
first one. No, this isn’t some kind of trick or mind game. No, I’m not going to
try any bullshit marketing ploy with you in order to keep you hanging in there.
Yes, I will continue to assume you are sentient beings who are smart enough to
make up your own minds. Yes, I have this thing about wanting readers who really
want and can use this publication. No, I don’t want you to feel obliged to keep
paying for something you might eventually begrudge. If you like The IKN Weekly then I’m more than happy
to provide it as a service for you in exchange for the money our family uses to
maintain our lifestyle (still kind of
amazed about it, even after 200+ editions in fact). If you don’t like it,
don’t buy it.

And now
for the punchline: Fact is, I’m keen on clearing as many people out of the
junior market as possible at this time because it’s becoming clearer by the
week that we’re bottoming and there’s going to be plenty of good money to be
made. The fewer participants the better and if The IKN Weekly can help the
process along, so much the better. For more on this I refer you to the “How your author sees 2013 developing for juniors”
piece in ‘Market Watching’ below and I’ll wrap up today’s intro with another quote from
Cervantes’ masterwork.

3/25/13

Last night Peruvian investigative journalism TV show 'El Cuarto Poser' got its hands on the report made by doctors on the health of ex-President and current long-term prisoner, Alberto Fujimori, and told the world that contrary to all the bullshit spouted by his inmundo familia, the dude does not have cancer. Lillie over at Memory in Latin America has more EngLang details on the news over at her esteemed site, but she also starts her post by wondering whether the news is a good or bad thing. Well Lillie, I can assure you it's an undoubtedly good piece of news:

It's good because a man does not have cancer, something nobody in their right mind would wish upon anyone.

It's good because there's no health reason to pardon the dude and let him off his completely justified prison sentence.

It's good because even though his jail cell is nothing short of luxurious, he gets to wallow there in his self pity indefinitely. Should give him time to think about things.

And it's good that his lying two-faced progeny have been shown up for what they most certainly are.

It's called justice, a new and welcome development in 21st century LatAm.

Here's the breakdown of Colombia's five biggest export items, plus the catch-all "other" category, per monthly exports in dollar terms since January 2000. Click either chart to enlarge them.

Here's the same data in total percentages of all exports:

Now, once and for all, give me a break about the importance of coffee in the Colombian export mix, will you? It was 3.7% of the whole caboodle in January 2013, it's the fifth biggest export and these days sits firmly behind both gold and chemicals. No folks, the whole ballgame here is fuels, with the combo of O&G and coal now making up 66% of everything that leaves Colombia.Data from here

3/24/13

IKN203 has just been sent to subscribers. We do a report on a junior copper name, a thought on how the year might shape up for the sector and we sell a small position that's turned into a crappy loser. All that and more.

One of the fashionable crimes in today's South America is the car robbery (rather than theft), where the nasty people pick out a luxurious looking car, follow it, wait for it to stop at some set of lights in the city centre and then jump the occupants and take all that's worth taking (cash, credit cards, phones, computers, etc).

But if you're going to do that, you should try to avoid targetting the luxury cars being used by visiting Vice Presidents because they tend to come with plain clothes security forces as back up.

Yup, that's what happened on Friday night in Quito Ecuador, when the car being used to move from A to B by Argentina's Veep Amado Boudou was set upon by car robbers, who were in turn slightly surprised to find themselves well and truly nicked in nanoseconds by the secret police watching over the visiting dignitary from the car behind. The result was nothing stolen and several criminals in jail. Score a point for the ruling classes.

Peru's benchmark pollster Ipsos/Apoyo is outwith its regular monthly polling numbers for President Ollanta Humala and here's how the updates look on our charts. First overall approval...

...which shows Ollanta's ratings levelling out at just over 50%. That might not be Dilma or Lula levels, but for the President of a country famous for constant grumbling and discontent about its political class, and well into his second year of office, that's an impressive enough average (far better than Toledo or García at this stage, to name just two examples). But perhaps more interesting is the evolution of approval when split into socio-economic groups, because...

...what we're now seeing is generalized approval from all society strata. Ollanta has made up ground with the Ds and Es, to the detriment of the As and Bs (frankly, I doubt he's going to lose any sleep over that). For the record, his disapproval rating is at 39%. Also, his wife Nadine gets 61% approval (the latest rumour on her is that she's setting up for a run at Mayor of Lima in two year's time when the job comes up for grabs).

The bottom line is that Ollanta gets a pass grade from his people. Not an outstanding grade, but a pass.

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